Great Location But House Needs Work Before We Can Call It Home
Renovation & Homestyle Mortgage Consulting
GREAT LOCATION BUT HOUSE NEEDS WORK BEFORE WE CAN CALL IT HOME.
You have been searching for months for the right home in the neighborhood you want to settle down
and raise your family. If I only had the money to remodel and upgrade the kitchen and bathrooms, it
would be the perfect home for my family. If you can see the potential in a home and your heart is set on
buying but you don’t have the savings to cover both a down payment a nd a renovation, there are loan
products out there that could help you make your dream a reality.

For more details on our products and services, please feel free to visit us at 203K Consultant, HUD
Consultant, Renovation Consultant, Real Estate Broker & ADU Consultant & Financing
Consider a loan with a renovation loan included…. all in one loan.
The Federal Housing Administration (FHA) 203(k) rehabilitation loan or Fannie Mae HomeStyle
Renovation Mortgage could be good financing options for buyers seeking fixer-uppers. These loans allow
you to purchase the home with a reserve that’s put in escrow to fund renovations.
There are strict guidelines which must be followed and it’s important to understand who can benefit
from acquisition and renovation loans.
Buyers must be able to afford the mortgage payments but they don’t have a lot of cash on hand or
savings to be able to pay for acquisition cost and renovation.If the scope of the renovation is big and it’s
a total overhaul costing 100% more than the existing property, you may want to consider another kind of
renovation loan.
First time home buyers with limited budgets who want to live in a particular area can usually benefit
from buying a less expensive home that’s a fixer-upper — and these loans make it financially feasible. An

FHA 203(k) or Fannie Mae HomeStyle conventional renovation mortgage allows consumers to go in and
purchase the home and work with the contractor with renovation funds included in one loan allowing
buyers to get maximum leverage from their available cash.
If you’re looking to make minor changes, however, borrowing money through a renovation loan may not
make the most financial sense. Saving and making improvements over time may give you a better
outcome.
How do these loans work?
Once the loan closes, one portion pays for the house while the other is deposited into an escrow
account. As work is completed, the mortgage lender sends an inspector to review the work. If the work is
completed to the scope of the project and to state and local building codes, money is released to pay the
contractor.
How much can I borrow?
The loan amount depends on the appraisal value and your renovation plans.
The buyer will find a house and work with a contractor or HUD consultant, and determine how much it
will cost to do the repairs. An appraisal is ordered based on the value of the property after all the
renovation work has been done — you have to submit the scope of work and the bid to the lender and
appraiser so they know what you plan to do.
The scope of your renovation may have to be dialed back in some cases, as neighborhood comps have to
support the home’s post renovation value. A renovation loan makes sense only if the renovation costs
don’t put the house new value far above comparable properties. If they do, you may have to wait on
making additional renovations or pay for them yourself.
What about choosing the contractor?
It may take some time to find the right contractor for your project.Verify contractor is licensed, insured,
and in good standing with the state licensing authority. Be sure to call their references and ask to view
jobs they’ve already completed to make sure you like their work. (You must work with a general
contractor when you borrow money through these products — you cannot be the general contractor.
You have to decide on the contractor before the loan closes. You will select the contractor but they must
be approved by the lender. If you have a contractor in mind whom you want to use, they have to apply to
be approved by that lender and it would be a good idea to get other bids prior to making a final decision.
How do the FHA 203(k) and HomeStyle loans differ?
FHA 203(k) loans require a 3.5% down payment and you can borrow up to the FHA loan limit in your
county. HomeStyle loans on the other hand require a 5% down payment and you can borrow up to the
Fannie Mae conventional loan limits. With a HomeStyle loan you’re also able to finance renovations
costing up to 50% of the completed appraised value.

While the FHA 203(k) and the HomeStyle loans both allow you to borrow up to a value that’s supported
by the comps, the FHA Streamlined 203(k) allows financing only up to $35,000 into the mortgage for
repairs and improvements.
While a contractor’s bid is required for most (if not all) of the work, the only program that allows for
work without a license contractor is the FHA 203(k) and it would only be allowed for minor repairs —
small-dollar-size repairs where the customer can provide evidence that they have the time, tools, and
the assets to do the renovations.
HomeStyle loans on the other hand don’t allow for any do it your self repairs. However, while they allow
borrowers to make the same renovations as in a FHA 203(k) loan, they also allow for the addition of
luxury items.
It is important to understand If you plan to buy a fixer-upper using these products. Work with a home
mortgage consultant who understands the product and can help guide you through the process…..it will
make the experience simple and rewarding.